By Robert Atkinson –
Business leaders often say they welcome competition. But the truth is, they welcome the threat of competition to keep them on their toes. The last thing any business leader really wants to contend with, if they can avoid it, is actual competition. Luckily for consumers, most industries don’t get to decide how many competitors they will allow onto the playing field; the market decides.
But some industries do decide for themselves — especially when they can enlist the regulatory hand of government.
Witness, for example, how taxi companies have worked with local authorities to fence off airports from competitors such as Uber and Lyft; how car dealers have made it illegal in all 50 states to buy directly from auto manufacturers; how entrenched law firms have sought to thwart online competition from upstart legal service providers; and how brick-and-mortar pharmacies have enlisted government’s help to curb mail-order prescriptions.
This kind of institutional resistance to disintermediation is so prevalent that even the satirical newspaper The Onion has poked fun at it.
But one of the most egregious examples of an industry guarding its established franchise at the expense of consumers is optometry. Unlike medical doctors who sell only their services (examining, diagnosing and treating patients), optometrists sell both their services (eye exams) and the products they prescribe: contact lenses.
It is against the law for consumers to buy lenses without a prescription. And so the profession has both a powerful economic interest (profits) and a powerful tool (the prescription) to ensure that consumers can’t buy their lenses from cheaper providers, such as online contact lens companies or big-box retailers.
The optometry industry has long used its unique gatekeeper power to limit patients’ ability to buy lenses outside of its cartel. With the advent of disposable lenses in the 1980s and then the emergence of online contact lens sellers in the mid-1990s, it became easy for patients to shop around for the best prices. But faced with this threat, the trade association for optometrists, the American Optometrist Association (AOA), fought back.
According to a complaint filed in 1994 by 32 state attorneys general, the AOA had leveraged optometrists’ hold on prescriptions to pressure lens manufacturers into distributing only to licensed optometrists, not to alternative providers. The threat was clear: If manufacturers didn’t play ball on optometrists’ terms, then optometrists would starve the manufacturers of business by refusing to prescribe their brands.
After six years of litigation, the AOA in 2001 settled with the state attorneys general and the class of consumers they represented, agreeing to pay a fine for the alleged antitrust activity and pledging to refrain from such activity in the future.
But meanwhile, through their state professional associations, optometrists were pressuring state legislatures to block legislation that would require optometrists to give prescriptions for patients to fill wherever they choose. Under this pressure campaign, only 22 states were requiring optometrists to give prescriptions to patients as of 2002.
Attempting to rectify this, Congress in 2003 passed the Fairness to Contact Lens Consumers Act (FCLCA), which, among other things, gave patients the same rights when it comes to contact lenses that they have had with eyeglasses since 1979 — the freedom to fill eye prescriptions anywhere they choose.
But after this law made it easier for consumers to buy lenses from other distribution channels, optometrists fought back again with further restrictive practices, this time by prescribing so-called “doctor only” lenses — limited-distribution brands of lenses that are available only through eye-care professionals. This practice once again drew the ire of state attorneys general, 39 of whom banded together in 2006 to urge Congress to outlaw it….